Externalities and biodiversity valuation’

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Externalities and biodiversity valuation’

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One of the most important reasons for loss of biodiversity, is that conservation and sustainable use of natural resources is generally not a viable financial option, and this is because of a combination of market and policy failures. Put simply, natural resources are under- valued because no account is taken of the time it takes to produce the next harvest, nor any costs involved in managing lands for future harvests, nor the environmental and social costs associated with loss of products. Internalising these costs, so that parties trading in a particular product pay a larger part of these costs, is a central element in dealing with the “externalities” that...

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1. ASEAN BIODIVERSITY
3. ABOUT YOU AND US Letter from the NBRU of Cambodia Dear Readers, This will provide various stakeholders a better Cambodia officially joined the ASEAN Regional appreciation of the economic importance of the Centre for Biodiversity Conservation (ARCBC) in early biodiversity of the ASEAN region. 2002, and is currently trying to catch up with the I encourage all our readers to get copies of accomplishments of the other ASEAN member coun- ASEAN Biodiversity so that more people will get a tries participating in ARCBC. We do appreciate the clearer understanding of the urgency of protecting opportunity given to us to expand our networking, and conserving our biological resources. research, database, and training efforts in biodiversity conservation. In May 2002, ARCBC conducted a thematic work- shop in the Philippines on the economic valuation of biodiversity. One of the presentations empha- sized that economic valuation could become a Kol Vathana powerful management tool and when used along- Deputy Director and side social, scientific and spiritual studies of NBRU Coordinator-Cambodia biodiversity, could present a convincing argument Department of Nature Conservation for conservation. As such, I am pleased that the and Protection June 2002 issue of ASEAN Biodiversity focuses on Ministry of Environment resource valuation and revenue-sharing mechanisms. Kingdom of Cambodia Contents Vol. 2, No. 2 " April-June 2002 About You And Us Bookmarks Profiles Readers’ Corner 2 Forest valuation: from science Letter from the NBRU of Cambodia 3 fiction to money on the table 34 Second quarter in a nutshell 4 3rd Research Conference of the ASEAN Regional Centre Editorial for Biodiversity Conservation Conservation dividends 7 Economic valuation of biodiversity 35 Surfing the web...of life 36 Special Reports An overview of valuation techniques: 8th Report of the ARCBC-co-funded Philippine Endemic Species Tarutao National Park – Advantages and limitations 8 Satun Province, Thailand 44 Conservation Project of the Economic valuation of the Leuser Frankfurt Zoological Society Ecosystem in Sumatra 17 New species discovered in Ways to estimate the value of forest Panay, Philippines 37 catchments 21 Vietnam hosts the world’s most How markets alter the effectiveness of endangered primates 38 enforcement, payments and agricultural projects near protected areas 25 Three Black-faced spoonbills “rediscovered” on the Philippine islands 39 Lorentz National Park – Province of New bird species discovered Paniai, Irian Jaya, Indonesia 50 in Cambodia 39 Celebrating Earth Day 2002 40 Database International Day for Biological Asean plants database now on-Line 58 Diversity Focusing on forests 42 Publications A profile of the protected area World Environment Day Training Resources Database Entries system of Singapore 30 Give Earth a chance 43 Capsule reviews 59 ASEAN BIODIVERSITY 3
4. ABOUT YOU AND US Second quarter in a nutshell June 26 – A rare green neighbouring West Bengal materials and sustainable June 5 – Several of the turtle, about 60 cm wide state of India a strong economic development at the world’s foremost ocean and weighing more than 70 shield against sea storms. local level, and provision of agencies, including the United kg, reappeared after 40 funding for cooperation Nations Environment years and laid eggs on June 11 – Environment projects with the world Programme (UNEP), have Koh Samui in Thailand. ministers from Brunei, community. created an Internet-based Guards would be deployed a Cambodia, Indonesia, Oceans Atlas week before hatching in Laos, Malaysia, Myanmar, June 6 – Australia and (www.oceanatlas.org) to help August to prevent more theft. the Philippines, Singapore, the Republic of Korea reverse the decline and Killing sea turtles and taking Thailand, and Vietnam announced plans to work promote the sustainable away their eggs is illegal in signed a pact to help together to protect birds development of oceans. The Thailand, punishable by up to each other tackle the land that migrate between the Atlas provides users with four years in jail and/or a and forest fires that have two countries. The East continuously updated data on fine of 40,000 baht. Green periodically blighted the Asian-Australasian Flyway the state of the world’s turtles have all but gone from region’s agriculture and extends from the Arctic oceans, maps, development Koh Samui but are often tourist industries with choking through Asia to Australia and trends and threats to human seen laying eggs in Malaysia clouds of smoke. Smoke and New Zealand. Birds fly health from the deteriorating and Indonesia. haze caused by massive through this route twice a marine environment. It is forest fires in 1997 and year from north to south and designed to be an June 26 – The Philippines’ 1998 cost regional econo- back, travelling up to 25,000 encyclopaedic resource and Department of Environment mies US$9 billion, mainly in km per year. Millions of the world’s foremost and Natural Resources agriculture, transport, and wading birds, like the Eastern information clearinghouse and (DENR) Secretary Heherson T. tourism. Each country will Curlew make this journey, online forum for experts in Alvarez asked University of cooperate in developing and stopping at wetlands in Korea ocean issues. To reach the Philippines (UP) President implementing measures to and Australia along the way. broader audiences, a CD- Francisco Nemenzo to help prevent fires and provide Australia already has bilateral ROM and other media will save the UP Arboretum, early warning systems. Under migratory bird protection supplement the website. one of the last remaining the agreement, ASEAN agreements with Japan and forests within Metro countries would allow fire- the Peoples’ Republic of June 3-15 – European Manila. Located in Quezon fighting and search-and-rescue China. Union ministers and City, the Arboretum is home personnel and equipment to ambassadors ratified the to trees, shrubs and herba- transit through their territo- June 5 – The World Wide Kyoto climate treaty at a ceous plants that are ries. This is the first regional Fund for Nature (WWF) United Nations ceremony, cultivated for scientific and arrangement in the world to celebrated the signing of the handing in papers from their educational purposes. It is collectively tackle land and Tri-national Wetlands respective nations. The currently threatened by the forest fires and its resultant Initiative, a historic interna- ratification means that operation of an open transboundary haze pollution. tional wetlands conservation national legislatures had garbage dumpsite, as well as agreement between Australia, approved the pact, aimed at encroachment by a growing June 7 – The Philippines Indonesia and Papua New cutting polluting emissions of local community. joined Brazil, China, Guinea. The Initiative is a greenhouse gases, blamed Colombia, Costa Rica, commitment to work together for rising global temperatures. June 17 – Threatened by Ecuador, India, Indonesia, to achieve sustainable Participants included Ireland, global warming, depleting Kenya, Mexico, Peru, South management of 3 million ha the Netherlands, Spain, biodiversity and rising fears Africa, and Venezuela in the of tropical wetlands identified Sweden, Germany, Denmark, of natural disasters, Group of Like-Minded as global priorities for Austria, Belgium, Britain, Bangladesh recently Megadiversity Countries conservation and contained Finland, France, Greece, Italy, launched a drive to put for the Conservation and within existing protected areas Luxembourg and Portugal. at least 20% of the Sustainable Use of - Kakadu National Park Margot Wallstrom, the country under forests. The Biological Diversity during (Australia), Wasur National European Commissioner for 20% forest cover is needed the 4th Preparatory Commit- Park (Indonesia) and Tonda the Environment, represented by 2015 to offset the tee Meeting for the World Wildlife Management Area the European Commission. impact of global warming Summit on Sustainable (Papua New Guinea). The and shield the country from Development in Bali, agreement will greatly May 27 – The IUCN/SSC frequent storms coming from Indonesia. The group improve the management of Asian Elephant Specialist the Bay of Bengal. Forests represents almost 70% of the these parks, and encourage Group met to draw up an now cover only 9% of the planet’s biological diversity the creation of other action plan for elephant country’s land. Sundarban, and around 45% of the protected areas. Conservation conservation in all of the 13 the country’s biggest world’s population. Member- benefits include cooperative range states, following mangrove forest and a ship in the group will allow action on common threats continued pressure from World Heritage Site, is partners to promote and and the protection of deforestation, hunting and facing decay as thousands conserve their country’s rich numerous endangered species major changes in land use. of trees suffered a “top biodiversity through the and millions of migratory The conference will focus on dying” disease without development of joint projects waders and waterfowl. major issues facing the Asian remedy. The Sundarban is in making inventories of its WWF’s Living Waters elephant in the wild, including home to Royal Bengal tigers resources, investment in the Campaign has recognized their virtual extinction in and hundreds of other use of endogenous technolo- this major contribution to Vietnam, widespread land wildlife species and provides gies that support the wetland conservation as a conversion on the Indonesian Bangladesh and conservation of genetic “Gift to the Earth”. island of Sumatra and also 4 APRIL-JUNE 2002 5. ABOUT YOU AND US the potential for conservation for Sustainable Tourism and convert cropland to woods planet. Pacific Island coun- efforts in the largely un- the Convention on Biological would raise forest and grass tries have places of out- studied forests of Myanmar. Diversity’s Guidelines for cover in China by 5%. The standing heritage value, but Sustainable Tourism in resulting green belts could only one site, East Rennell May 23 – The “Greening Vulnerable Ecosystems; create reduce wind speeds by 30 to Island in the Solomon the World Summit on an international accreditation 50% and cut sand and dust Islands, has been nominated Sustainable Development” body for ecotourism and by 99% over barren land. and included on the World initiative was launched in sustainable tourism as well as Heritage list. East Rennell is Johannesburg, South Africa to determine measures to May 14 – Bangladesh and the largest example on Earth ensure that the World Summit ensure that local people India will work together of a raised atoll. It also has is hosted in a way that benefit from ecotourism. under a United Nations the largest freshwater lake, demonstrates environmental plan to protect the Te Nggano, in the Pacific, a best practice May 16 – The Philippines’ ecosystem and biodiversity unique habitat for many while countering Department of Environ- of Sundarban, the world’s species of plants, birds and the impact of ment and Natural biggest mangrove forest animals that are found 60,000 expected Resources (DENR) pre- shared by the two countries. nowhere else on Earth. delegates. By sented the results of the UNESCO declared the taking steps to Philippine Biodiversity Sundarban a world heritage April 25 – The British reduce waste Conservation Priorities site in 1997, and the U.N. Antarctic Survey announced and encourage the efficient Project (PBCPP), which Development Programme has that armies of barnacles, use of water and energy, the identified, assessed, and funded projects to save it mollusks, sea worms, and initiative will ease the burden prioritized specific geographi- from degradation. Nearly other marine organisms of the WSSD on the cal areas for biodiversity two-thirds of the 9,630- are travelling on discarded environment. It will also leave conservation. Spearheaded by square-km Sundarban lies in plastic and other human- a legacy the DENR’s Protected Areas Bangladesh and the rest in made rubbish and of projects that will bring and Wildlife Bureau (PAWB), India, stretching along the invading Antarctica and about improvements in Conservation International Bay of Bengal. Sundarban, tropical islands, threatening the quality of the environment (CI), and the University of the which is home to the native species. The findings in poor and rural communi- Philippines (UP), the project endangered royal Bengal are based on a 10-year study ties over the long term. had the participation of some tigers and a number of other of human litter washed More information can be 300 local and international unique species such as the ashore on 30 remote islands obtained from scientists from more than Sundari tree, is currently around the globe. Regulations www.greeningthewssd.com. 100 institutions and identified facing a number of threats forbidding the dumping of 170 terrestrial and inland including illegal poaching, the waste from ships has begun May 20 – Over 1,100 water priority areas and 26 felling of trees, and dwindling to make a difference, but delegates from 130 countries marine priority areas. The freshwater flow. more needs to be done attended the World project also set the much- because once an invading Ecotourism Summit in needed direction for the organism gets into an area, it Quebec to ensure that Philippine conservation is impossible to remove it. ecotourism follows a community as a whole, and Studies will be expanded to sustainable path. The summit, provided geographical include other islands, such as an initiative of the World information on areas that the Andamans, L’Ile Tourism Organization and the need urgent attention. Amsterdam, Bermuda, United Nations Environment Outputs included two-sided Chagos, Cocos/Christmas Programme, was realized in coloured maps, a CD-ROM and Trinidad. partnership with Tourisme database and a report that Québec and the Canadian provides additional informa- April 19 – Peter Ng, director Tourism Commission. tion on the priority areas. of a museum on biodiversity Participants were expected to Photo courtesy of UNESCO at the National University of define the content and limits May 15 – China announced East Rennell Island World Singapore, announced that of the term ecotourism itself, plans to spend several Heritage Site Singapore’s only unique so as to prevent its abuse hundred billion yuan in the wild animals – the Cream- and the dilution of its next 10 years to protect May 8 – Australia and coloured Giant Squirrel and meaning; develop interna- forests and plant green UNESCO signed a formal the Banded Leaf Monkey – tional standards for belts to combat blinding Memorandum of Under- face extinction due to ecotourism by translating sandstorms, illegal logging, standing on World urbanisation and shrinking principles and guidelines such and rapid soil erosion. Heritage issues in the forests. Less than 20 Banded as the World Tourism Recurring sandstorms have Asia-Pacific. Since the Leaf Monkeys and no more Organization’s Global Code been blamed in part on region is under-represented than four squirrels still live in of Ethics, the UNEP Principles overgrazing, over-harvesting on the World Heritage List what is left of the tiny island of timber, forest clearance for and a number of countries in nation’s forests. Their likely cropland and rampant the region have only recently extinction will mean the end overuse of water resources. joined the World Heritage of the last animal sub-species China has earmarked 10 Convention, the Memoran- found only in Singapore. The billion yuan (US$1.21 billion) dum will help Australia and government is currently a year for natural forest UNESCO work together in working with local groups to protection efforts formally partnership with regional study and protect the animals. launched in 2000, one of six nations in promoting the But with only 3% of the Photo courtesy of World Ecotourism Summit key forestry programs to be Convention and managing island set aside for parks, Charlevoix Biosphere Reserve, underway by the end of cultural and natural values in efforts to breed the animals Québec 2002. A seeding program to this heritage-rich part of the in captivity and reintroduce ASEAN BIODIVERSITY 5
7. ABOUT YOU AND US Editorial ‘Externalities and biodiversity valuation’ # By Glyn Davies O ne of the most important Finally, the outcomes of policy reasons for loss of incentives are often uncertain. Care biodiversity, is that con- is needed in their planning, there- servation and sustainable use of fore, to ensure planned outcomes natural resources is generally not are realised, and Strategic Environ- a viable financial option, and this mental Assessments should be used is because of a combination of to look at the likely environmental market and policy failures. Put and social impacts of planned policy simply, natural resources are un- changes. Thereafter, the real impacts der-valued because no account is of policy change need to be moni- taken of the time it takes to pro- tored. duce the next harvest, nor any costs In this issue, the articles featured involved in managing lands for in the Special Reports section were future harvests, nor the environ- presented during the Third Research mental and social costs associated Conference on the “Economic Valu- with loss of products. Internalising ation of Biodiversity”, which was these costs, so that parties trading sponsored and conducted by the in a particular product pay a ASEAN Regional Centre for larger part of these costs, is a ii. standards, regulations and Biodiversity Conservation (ARCBC) central element in dealing with the restrictions – these are stan- in June 2002. “externalities” that are driving dard institutional instruments Arguing that valuing biodiversity biodiversity loss. used to set maximum accept- is a key policy interest, the papers A number of approaches have able levels of resource deple- stressed that the economic valua- been taken to address these exter- tion, for example by restrict- tion of biodiversity is a powerful tool nalities, and these can be thought of ing harvest off-takes. for management, and a convinc- in terms of incentive measures to iii. fees and environmental ing argument for conservation es- support conservation and sustain- charges – these can be used pecially when used alongside so- able use of natural resources. First, to recover costs of maintain- cial, scientific and spiritual studies and probably the most important ing or replacing natural re- on biodiversity. Although there are incentive in many areas is to remove sources, and include timber some who insist that putting a high perverse incentives – policies, sub- taxes, fishing licenses, and value on biodiversity would not al- sidies and low commodity prices park entrance fees. ways guarantee its conservation, the which make it profitable to exploit iv. public financing and environ- correct incentives and mechanisms natural resources without concern for mental funds – financial in- to capture the resource values long-term outcomes. centives can be offered to should be put in place. Without such Thereafter policy incentives that those who harvest in ways that incentives, value estimates would can be implemented to contribute reduce natural resource only represent values on paper that directly to improving the manage- losses. would have limited impact on the ment of biodiversity can be divided However, none of these incen- decision-making process or none at into four categories: tives will be effective without well- all. i. trade liberalisation and regulated markets, nor will they Notwithstanding its weaknesses, property rights – which can work without strong political com- the economic approach facilitates encourage greater benefits mitment to ensure that policy incen- comparisons in a world where re- to local stewards of natural tives are appropriate and imple- sources are limited and choices have resources, thereby providing mented. Furthermore, giving values to be made.# an incentive for them to to biodiversity values that are long- Glyn Davies is the Conservation engage in sustainable pro- term and intangible poses many Programme Director of the Zoological duction systems. problems. Society of London. ASEAN BIODIVERSITY 7
8. SPECIAL REPORTS An overview of valuation techniques: Advantages and limitations # By Camille Bann Introduction V Box 1. Uses of Economic Valuation and Biodiversity Conservation aluing biodiversity is of key • Raise public and political awareness of the importance of biodiversity. policy interest. Economic val- • Set conservation priorities given a limited budget. ues of non-marketed goods • Facilitate land use decisions. • Guide legal proceedings for determining damages where an agent is held liable for can draw attention to the economic biodiversity loss. importance of biodiversity in a • Limit or ban trade in endangered species. country’s development prospects, • Prevent new invasions. and can provide guidance for imple- • Revise national income accounts. • Design capture mechanisms (e.g., market creation, economic instruments, international menting appropriate conservation transfers). mechanisms (other uses are outlined • Revise investment decisions (e.g., infrastructure development) that might otherwise ignore in Box 1). However, estimating the the impacts on biodiversity. monetary worth of biodiversity is per- Source: OECD, 2002 haps the most challenging area of 1 environmental resource valuation. potential human uses . include: Fundamental to any discussion There are other reasons why it is • Distributional Equity - Distribu- of the value of biodiversity is an difficult to put a monetary estimate tional concerns are rarely in- understanding of what precisely the on biodiversity. There is a lack of corporated into the economic object of value is. It is necessary to consensus on the total number of evaluation framework despite distinguish between biological re- living species (i.e., baseline measure- the fact that they are often of sources and biological diversity. A ments for biodiversity), rate of paramount concern, especially biological resource is a given ex- biodiversity loss, and biodiversity in poor countries. ample of a gene, species or eco- indicators fundamental to the valu- • Discounting and Future Gen- system. Biological diversity refers to ation process (see Box 2). There is eration - Discounting does not the variability of biological resources. also a lack of knowledge of the true satisfactorily deal with signifi- Biodiversity is the ‘variety of life’ value and extent of current and cant environmental costs and whereas biological resources are the potential future uses of biodiversity. benefits occurring in the future manifestation or embodiment of that Criticisms of Economic Evalua- (although these concerns can variety (OECD, 2002). tion and Cost Benefit Analysis (CBA) be dealt with by other means). Because diversity valuation re- quires some idea of willingness to Box 2. Biodiversity Indicators and Policy Assessment pay (WTP) for the range of species Measurement of biodiversity is very complex because diversity is multi-dimensional. There are and habitats, it is hard to use the fundamental definitional problems relating to species and ecosystems. For example, discrete cut-off term ‘biodiversity’ as the object of points for determining boundaries between species (Gaston and Spicer, 1998) or ecosystems is valuation. In reality what economic still subject to research and discussion. Even if this issue was resolved, the inventory task is monumental given the staggering number of microorganisms present at any location. The task is studies normally measure is the even more unmanageable at that genetic level. Furthermore, science has only a limited idea of economic value of ‘biological re- the genetic dissimilarity between species. sources’ rather than biodiversity it- Notions of species richness, evenness and distance are the most used expressions of diversity1 . self. Biological resource is a more Clarification of these measures has important implications for conservation policy. Solow et al 1993 anthropocentric term for biota such show that if the objective is to conserve diversity, an understanding of species distance is very important. Solow presents an example using the pairwise distance between cranes and their as forest and components of extinction probabilities. The conservation of the most endangered species does not in fact maximise biodiversity that maintain current or diversity. The reason for this is that the genetic distance between the endangered species and at least one of the ‘safe’ species is small. Minimising the probability of the number of species lost 1 This anthropocentric view of biological is not the same as minimising the value of lost biodiversity. In practice conservation resources resources is much more convenient for are largely allocated to ‘exotic’ species conservation (e.g., giant pandas and tigers) without any economic analysis compared to alternative value paradigms such as real consideration of the diversity issue. This focus might be because the difference between ‘intrinsic values’ (values in themselves biological diversity and biological resources is unrecognised, or because conservation policy responds and, nominally, unrelated to human to the high values attached to scarce species. Nonetheless, if the stated aim is to conserve use). Intrinsic values are relevant to diversity, those policies may not be soundly based. conservation decisions, but they generally cannot be measured (Pearce and Moran, Source: OECD, 2002 1994). 8 APRIL-JUNE 2002
9. SPECIAL REPORTS • Intrinsic vs. Instrumental Value Box 3. Categories of Valuation Techniques - There are different philo- Approaches Based on Market Values sophical viewpoints on ‘value’. • Observed Market Value and the Related Goods Approach –market prices for CBA is founded on the instru- environmental goods and services can be combined with quantity information to derive mentalist view, whereas it is estimates of value. The related goods approach uses information on the relationship argued that the ‘true’ notion of between a marketed and non-marketed good or service to estimate the value of the non-marketed good (e.g., barter exchange approach, direct substitute approach, indirect biodiversity value is intrinsic. substitute approach). • Relative vs. Absolute Value - • The Productivity Approach – uses market prices to value environmental services in CBA embodies the situations where environmental damage or improvement shows up in changes in the quantity or price of marketed inputs or outputs. economist’s notion that value • Cost-Based Methods – use some estimate of the costs of providing or replacing a is relative, i.e., the value of good or service to approximate its benefit (e.g., opportunity cost, indirect opportunity something is always relative to cost, restoration cost, replacement cost, relocation cost, preventive expenditure). something else. Critics argue Cost-based methods are second best techniques and must be used with caution. that biodiversity has absolute Revealed Preference Approaches - use information about a marketed commodity to infer the value of a related, non-marketed commodity (e.g., travel cost method, hedonic pricing value in itself, and hence it method). cannot be measured relative Stated Preference Approaches - elicit directly, through survey methods, consumers’ to other things. willingness to pay for non-marketed environmental values (e.g. contingent valuation method). • Incremental vs. Total Values - CBA values discrete changes ample, to estimate ‘option values’ Valuation approaches can be in the stock of biodiversity. It for future uses. Also, the baseline broadly categorised according to is argued that CBA might information allows setting of man- market values, revealed preference judge each small loss of agement and research priorities approaches and stated preferences 3 biodiversity as being justified, (Huber et al, 1997). approaches (OECD, 2002) . Valua- while overlooking the fact that tion approaches based on market each small change contributes An Overview of Valuation values rely on the availability of to the risk that the total stock Techniques2 market price and quantity informa- will be lost (Norton, 1988). A range of techniques is avail- tion to derive total values. Revealed Despite these drawbacks there is able for the estimation of biological preference valuation techniques seek considerable scope for at least se- resource values (see Box 3). A com- to determine preferences for the curing minimum values for biologi- prehensive valuation would capture environment from actual, observed cal diversity through the use of the Total Economic Value (TEV) of market based information. Often, approaches focused on the market the resource (i.e., use and non-use when no market price exists for an values of the sustainable uses of values). Different valuation ap- environmental good or service, biodiversity (e.g., ecotourism, and proaches are applicable to the dif- peoples’ preferences for the envi- the collection of medicinal plants and ferent components of TEV. Direct ronment can be ‘revealed’ indirectly other non-timber forest products use values are relatively straightfor- by examining their behaviour in [NTFP]). Measuring these direct use ward to measure, and usually in- markets that are linked to the envi- values of biodiversity conservation is volve the market value of produc- ronment. Some goods and services extremely important since biodiversity tion gains. Since environmental func- are complements to environmental will be more prone to loss when these tions are rarely exchanged in mar- quality, while others are proxies, are not appreciated. Furthermore, kets, measurement of indirect use surrogates or substitutes for it. There- estimates of direct use values pro- values typically entails more com- fore, by examining the prices paid vide an important benchmark for plex techniques such as the change in environment-related markets, other, less easily quantified, uses. in productivity approach, travel cost peoples’ environmental preferences While most of these other uses are method, and hedonic pricing can be uncovered (Pearce and still associated with some particular method. Non-use values can only Moran, 1994). An advantage of current or future use (such as be defined from surveys of people’s these techniques is that they rely on bioprospecting or amenity), the preference about their WTP (e.g., actual choices rather than on the uncertainty associated with valuing Contingent Valuation). Non-use creation of a hypothetical market to these goods and services is often values tend to be important in cer- uncover the value of the environmen- orders of magnitude greater than the tain contexts, notably when the good 2 This paper provides a non-technical uncertainty associated with the in question has few substitutes. Since overview of valuation techniques. For a simple direct (but often untraded) many biological resources are by detailed account on methodologies, see Freeman, 1994; Johansson, 1994. uses. The availability of such baseline definition unique, their non-use value 3 Many authors categorise valuation information is necessary, for ex- is likely to be significant. techniques differently. ASEAN BIODIVERSITY 9
10. SPECIAL REPORTS tal good or service in question as Table 1. Observed Market Prices and Related Goods Approach – Advantages and Limitations stated preference approaches do. Advantages Issues / Limitations The correct measure of value is an Relatively simple. Market values tend to reflect actual use and individual’s maximum WTP to pre- hence ignore non-use values. vent environmental damage or High intuitive appeal. Does not capture consumer surplus. realise an environmental benefit Likely to require the undertaking of market surveys and (represented by the area under the direct use surveys (However such surveys are simpler demand curve). Economic values and less costly to conduct than those required by more comprise both the price paid in sophisticated approaches). markets and the consumer surplus Large data requirements may be necessary to estimate that users obtain. Consumer surplus theoretically correct values. indicates the excess of what the consumer would have been willing values should be recorded and or service. By using information to pay over what he or she actually reported. Such information will con- about this relationship and the price had to pay. This concept is particu- tribute to priority setting. of the marketed product, the analyst larly important when estimating the may be able to infer the value of the benefits of environmental goods and Observed Market prices non-marketed product. For ex- services that have a low, or no market Where market prices exist they ample, the direct substitute approach price. In such cases, the entire area can be combined with quantity in- bases the value of a non-marketed under the demand curve represents formation to estimate the value of a good such as fuelwood, on the price the benefit of the good. To estimate resource. The use of market prices of its closest marketed substitute (e.g., economic value, we therefore need is undoubtedly the most straightfor- charcoal) and the rates of exchange to be able to derive the demand ward of the valuation approaches between them. curve. Valuation approaches based and provides a relatively cheap and on market values do not allow us to quick estimate of value. However, Application to Biodiversity do this and so will always underes- few studies report theoretically cor- Many natural resource products timate the true value of the resource. rect estimates due to data constraints. have market prices that can be used Strictly speaking efficient prices in the valuation exercise, for ex- Valuation Approaches should be used, i.e., they should ample, non-timber forest products, The following section provides a account for any distortions such as and genetic material for agricultural brief description of the individual externalities, taxes and subsidies. products and drugs. Empirical stud- valuation approaches. For each tech- Values used should be net of pro- ies demonstrating the values of nique a Table is provided summarising duction costs. They should also be naturally occurring products are its advantages and limitations, and its based on optimal harvesting levels, common (see Bann 1998, Pearce application to biodiversity valuation is and account for seasonal changes and Pearce, 2001 for review). outlined. In reality, decisions on what in production and prices. Market valuation approach to use will depend analysis may also be necessary to The Production Function Approach on the nature of the study plus the understand the likely effects of market The production function approach availability of resources (funds, time expansion, shifts in demand and in- is a common economic technique, and expertise). ternational price fluctuations. which relates output to different lev- els of inputs of the so-called factors Approaches Based Related Goods Approach of production (land, labour, capital, on Market Values The related goods approach raw materials). It is often thought of There are three valuation ap- consists of three similar valuation as the most straightforward way to 4 proaches based on market values: techniques: barter exchange, direct valuing the environment . • Observed market value and substitute, and indirect substitute More formally, the production related goods approach approach. These relatively simple, function for a single output may be • Productivity approach intuitive approaches are often useful given by: • Cost based methods includ- for estimating products in develop- y = F (X, Z) ing replacement cost. ing countries that are largely used Approaches using market prices by rural communities for subsistence 4 Variously called the change in produc- offer the most pragmatic route to purposes or traded informally. These tion approach, the input-output or dose response approach. All involve an the monetisation of environmental approaches are based on the fact attempt to relate the incremental output use values. Therefore, economic that often a non-marketed good or of a marketed good or service to a measurable change in the quality and values such as they exist in market service is related to a marketed good quantity of a natural resource. 10 APRIL-JUNE 2002
11. SPECIAL REPORTS where X is a set of inputs (e.g., is clear and can be observed, or Cost-Based Valuation land, capital) and Z is the input of tested empirically; and, markets Cost-based valuation techniques the un-priced environmental re- function well, so that price is a good assess the costs of different measures source. Let us assume that we can indicator of economic value (OECD, that would ensure the maintenance measure output y that has a market 1995). of the benefits provided by the price. If prices of inputs X are not Specifying the physical effect of environmental good or service be- expected to change when supply of a change in environmental quality, ing valued. These cost estimates are the environmental resource (Z) and the resulting impact of the then used as proxies for the non- changes, then the economic value physical effect on the economic market environmental benefit in of the change in the supply of Z is activities can be difficult and data question. Cost-based valuation the value of the production change intensive in practice. These functions approaches include: opportunity associated with the change in Z at may be estimated or derived from cost-based approaches; ap- constant inputs of the other factors existing literature, but ideally expert proaches that measure environmen- 5 (X) (Pearce and Moran, 1994) . scientific studies are required. tal values by examining the costs of For example, assume that an Where environmental change has reproducing the original level of ben- ecological function of a tropical forest a sizeable effect on markets, a more efits (e.g., the replacement, restora- is support for downstream fisheries complex view needs to be taken of tion and relocation cost methods); by ensuring a regular flow of clean the market structure, elasticities, and and, the preventative expenditure ap- water to spawning grounds for fish supply and demand responses. proach, which examines the up front and nurseries for fry. The forest area Consumer and producer behaviour payments made to prevent environ- 6 in the watershed (S) may therefore needs to be introduced into the mental degradation. have a direct influence on the catch analysis as behaviour may alter in A practical difficulty is ensuring of some fish species dependant on response to changes in the environ- that the cost of maintenance will the area, Q, which is independent ment. In addition, the impacts of provide a benefit equivalent to the from the standard inputs of commer- market conditions and regulatory benefit of the original good. A cial fishery, Xi...Xk. Including forest policies affecting production deci- potential cause of overestimation watershed area as a determinant of sions need to be taken into account. occurs if the benefits of maintenance fish catch may therefore ‘capture’ Unless these factors are accounted do not exceed the costs of main- some element of the economic con- for, the production function approach tenance. If this is the case, then the tribution of this ecological support may produce unreliable information. investment is not a profitable use of function (Barbier 1992). economic resources and the cost of Application to Biodiversity Valuation maintenance activities may be Q = F(Xi...Xk, S) The production function ap- larger than the WTP for the original proach has strong intuitive and prac- environmental benefits 7 . Con- The approach is most appropri- tical appeal and has been used versely, if the benefits generated by ate where: the environmental change frequently in developing regions to the maintenance activity exceed that directly causes an increase or de- estimate the indirect functions of of the original environmental ben- crease in the output of a good (or ecosystems. For example, the im- efits, then the costs of maintenance service) which is marketed; the effect pact of deforestation on soil erosion activity may surpass the WTP for the 5 This approach can also be applied to and water production and quality, 6 The preventative expenditure approach is output which is not marketed but where and the impact of the loss of man- also referred to as the ‘defensive an actual market exists for similar expenditure approach‘ ‘mitigation substitutes or goods. grove area on fish productivity. approach’ or ‘avertive behaviour approach’. There are two different Table 2. Production Function Approach – Advantages and Limitations approaches to this type of analysis and only one of them is truly a cost-based Advantages Issues / Limitations valuation technique. If estimates of what people are willing to pay to prevent Strong intuitive and practical Specifying biophysical relationship can be complex and/or damage to the environment or them- appeal, therefore popular with data intensive. selves are elicited through the use of constructed markets, or by the examina- policy/decision makers. tion of past events in similar circum- Market values tend to reflect actual use and hence ignore stances through the use of revealed non-use values. preferences exhibited through actual or Does not capture consumer surplus. surrogate markets, first based estimates of value will be derived. Market prices need to be corrected for market and policy 7 In certain cases, such as estimating the distortions. costs of relocating communities affected by land use changes, satisfying this Where the environmental change has a sizeable impact condition may not be critical. Concerns on the market, a more complex view of market structure over equity (ensuring just compensation) is necessary. may override any economic criteria being placed on the cost of relocation. ASEAN BIODIVERSITY 11
12. SPECIAL REPORTS Table 3. Cost Based Valuation – Advantages and Limitations estimate the number of trips visited Advantages Issues / Limitations to a site or sites over some period of time, perhaps a season. Random A practical approach where Considered to be second best techniques as they are resources (time, data, likely to be inaccurate because they use costs as a utility models consider the specific money) are lacking. measure of ‘benefit’. decision of whether to visit a recre- Less data intensive and time Market values tend to reflect actual use and hence ignore ational site, and if so, which one consuming than the more non-use values. (see Freeman, 1994). sophisticated approaches. The TCM is applicable when: Does not capture consumer surplus. the study site is accessible for at original environmental benefits. vantages of using more exact but least part of the time; there is no Further, because they bear no re- costly techniques. direct charge or entry fee for the lation to demand or WTP for en- good or service in question, or vironmental goods and services, Application to Biodiversity Valuation where such charges are very low; cost estimates fail to reflect con- Despite their theoretical shortcom- and, where people spend a sig- sumer surplus (and may also un- ings, such approaches are widely nificant time, or incur other costs, derestimate producer surplus) thus used. The replacement or restora- to travel to the site. tending to underestimate environ- tion cost is, for example, used to The TCM techniques have im- mental values. value various ecosystem services and proved considerably since the ear- The replacement cost method has is implicit in the ‘public trust’ doctrine liest studies were carried out but a recently been used to estimate the in the USA as it relates to certain number of reservations as to its use values of ecosystem services natural resource damage costs. remain. Of particular concern is the (Costanza et al 1997; Pimentel et al large amount of data required, 1997 and Ehrlich and Ehrlich 1996). Revealed Preference Approaches which is expensive to collect and However, the Costanza et al study is Revealed preference methods process. Furthermore difficulties with criticised on theoretical grounds (see include traditional travel cost mod- estimation and data analysis remain. Pearce, 1998). It is argued that the els of recreational use, random util- The method is likely to work best when replacement cost is only valid if three ity models, hedonic models, and applied to the valuation of a single conditions are met (Bockstael et al averting behaviour models. These site, its characteristics and those of [2000]): methods rely on a surrogate market other sites remaining constant. The 1) the human-engineered system that provides a ‘behavioural trail’ to method has limited use for valuing provides functions that are identify the environmental value of anything other than parks and char- equivalent in quality and interest. They may be considered ismatic species that can provoke magnitude to the natural func- ‘true’ valuation approaches in the travel behaviour. The most credible tion; sense that they facilitate estimation applications to date have involved 2) the human-engineered solu- of demand curves and hence con- national parks, recreational sites and tion is the least cost alternative sumer surplus. Generally, these international travel behaviour when way of performing the func- approaches are favoured over stated visiting wildlife parks and reserves tion; and, preference approaches by many (Tobais and Mendelsohn, 1991; 3) the individuals in aggregate economists and policy makers be- Maille and Mendelsohn 1993; would be willing to incur these cause these values are revealed in Hanley and Ruffell 1993). costs if the natural function real, rather than hypothetical, mar- were no longer available. kets. However, they are limited in the Application to Biodiversity sense that they are unable to ac- Where feasible, TCM is impor- These conditions are rarely count for non-use values and have tant when evaluating the demand achieved hence use of replacement large data requirements. for recreational facilities. The infor- costs is rarely accurate. mation derived from a TCM study Due to the inaccuracies inherent Travel Cost Method can be used to: set appropriate en- in cost-based valuation approaches, With the travel cost method trance fees to national parks and they are generally regarded as (TCM), it is assumed that travel costs reserve areas; allocate national rec- second best valuation techniques. to a site can be regarded as a proxy reation and conservation budgets However, they can be extremely for the value of the non-market asset. between different sites; and inform useful when there are limitations on The TCM is commonly applied to land use decisions – for example the time and resources for detailed recreational areas and national whether it is worth preserving a site research or when data sets are so parks. Two perspectives are possible. for recreational use or a rival land questionable as to reduce the ad- Simple travel cost models attempt to use. 12 APRIL-JUNE 2002
13. SPECIAL REPORTS Table 4. Travel Cost Method – Advantages and Limitations Application to Biodiversity Valuation Advantages Issues / Limitations The application of HPM to biodiversity is extremely limited. Few Provides estimate of demand General curve therefore possible to The method has limited use for valuing anything other biodiversity-related attributes are estimate consumer surplus. than parks and charismatic species that can provoke likely to show up systematically in travel behaviour. the complementary market prices - Where feasible, can provide estimates of value of parks and Does not account for non-users, off-site benefits and non- the WTP for housing in most cases, recreational facilities. use values. and even when they do, accurate Theoretical data to describe them is rarely avail- Time Costs – determining the value to be attached to able to undertake robust analysis. travel time. Studies relating to the value of Dealing with multi-purpose visits. forestry, shoreline and landscape How to deal with substitute sites. have relied on these attributes being Treatment of utility or dis-utility from travelling. significant in local property markets (e.g., Garrod and Willis 1992). Truncation or sample selection bias in dealing with site visitors, and neglecting non-visitors. A closely related application is Difficulties with the estimation and data analysis techniques. the valuation of plant genetic re- sources for agriculture – e.g., plant Practical breeding and crop improvement Survey based and large amounts of data required, (Evenson 1990; Gollin and Evenson therefore expensive and time consuming. 1998). The steps for conducting this Requires trained interviewers to carry out survey work and statisticians and/or econometricians to carry out research are similar to its analogue analysis. in the housing sector although the data requirements are just as oner- Table 5. Hedonic Pricing – Advantages and Limitations ous. In this context the ‘external’ Advantages Issues / Limitations value of interest is a naturally occur- The hedonic approach is It relies on the assumption of a freely functioning and efficient ring material germplasm or genetic founded upon a sound property market. trait, which is an attribute of an economic theory base and is original crop landrace prior to crop Huge data requirements. capable of producing valid estimates of economic The approach only reflects impacts to the extent that individuals improvement. The original raw benefits. are aware of them. material or trait is ultimately one A number of statistical problems may hinder its feasibility. attribute of a final product. If the It is essentially an ex post valuation and does not contribution of that trait can be iso- capture non-use value. lated from the other production factors, then its resource value can Hedonic Pricing Method other things constant. In other words, be estimated. The steps necessary The Hedonic Price Method the value is revealed from within the for undertaking such an analysis are (HPM) is another revealed value value of the property. The method summarised in Box 4. technique that relies on market prices is data demanding and there are Clearly this methodology has (typically property prices or wages) few applications available in the important implications for the is- to embody the value of the envi- published literature. sues of benefit sharing and intel- ronmental attribute (or job risk) of interest. The property value ap- Box 4. Estimating the Contribution of germplasm of original landraces to Rice Productivity proach, for example, is based on Gollin and Evenson (1998) show how the HPM can be applied to the analysis of the the assumption that the value of land productivity of alternative categories of rice germplasm in India. The key steps are: is related to the stream of benefits • For a crop – e.g., rice, divide gains in output into gains from yield and gains from increased area under cultivation. derived from it. The value of a • Disaggregate rice yield gains into gains attributable to varietal improvement, other house, for example, is affected by technological advances and other sources of change. many variables including size, con- • Assume varietal improvement is dependent on stocks of advanced crossing material from struction, location and the quality different sources and other research resources. of the environment (air quality and • Stocks of advanced material depend on the existence of traditional landraces and wild noise pollution). With sufficient data species. on property values, it is in theory • Link productivity to original germplasm, its origins and ownership. possible to tease out the value of • Note finally that the data requirements are onerous. In short detailed information is required on the productivity of all factor inputs in all the above stages. the environmental feature holding ASEAN BIODIVERSITY 13
17. SPECIAL REPORTS Economic valuation of the Leuser Ecosystem in Sumatra # By Pieter van Beukering, Herman Cesar and Marco Janssen D espite its formally protected use of economic techniques for the cooking. The classic example of status, the Leuser Ecosystem appraisal of projects and policies. an indirect use value as it relates is under severe threat of A method central to this effort is to rainforest ecosystems is the water deforestation due to the economic ‘economic valuation’. In this study, retention function provided by for- crisis in Indonesia. Not only is this economic valuation is used as the ests to support downstream agri- believed to have severe ecologi- main analytical tool to compare cultural areas. Non-use values, cal consequences, but the local the advantages and disadvantages among others, refers to an economy is also expected to be of certain scenarios in the Leuser individual’s willingness to pay structurally damaged. The decline Ecosystem. Nowadays, most (WTP) to secure the continued ex- of several crucial ecological func- economists agree that the value of istence of, for instance, an endan- tions of the rainforest may have natural resources depends not only gered wildlife species, without ever serious consequences for numer- on the market prices of its direct actually seeing it in the wild (a ous economic activities in and uses, but also on all other func- ‘use’). The classic example here is around the Leuser Ecosystem. tions of the natural resources that the contributions people make to Mainly, this study aims to determine generate value in its broadest actions that aim to preserve char- the Total Economic Value (TEV) of sense. This is reflected in the con- ismatic mega-fauna such as the the Leuser Ecosystem and evaluate cept of the so-called TEV. tiger or the panda. If an individual the consequences of deforestation In determining the TEV of a is willing to pay $400 for preserv- 1 for its main stakeholders. tropical rainforest, a distinction is ing biodiversity in some rainforest often made between direct use area without any present or future What is economic valuation? values, indirect use values and use in mind (source of food, lei- The road towards sustainable non-use values. The first relates to sure hunting, wildlife viewing, etc.), development involves better inte- the values derived from direct use then this is his or her non-use value. gration of environmental consid- or interaction with a rainforest’s re- A common way to determine erations into economic decision- sources and services; the second use and non-use values is to pur- making, in particular through the stems from the indirect support and sue the sequence of underlying protection provided to economic processes, starting with the cause 1 The lack of reliable data in combination activity and property by the of an impact, on to the physical with the need for quantification and rainforests’ natural functions, or impact and ending with the social monetisation of the main effects forced us to adopt rather compromising regulatory ‘environmental’ services. and economic effects. The ap- assumptions. Therefore, these results should be considered as indicative, but A typical example of a direct use proach in this study proceeds in a not as authoritative if it comes to actual value of rainforest ecosystems is the series of methodological steps. investment decisions in the Leuser Ecosystem. provision of wood for housing or Figure 1 provides an example of Reduced pest Increase use Increase production control fertilizer and costs (in US$) and pollination pesticides (in kg) Reduction in water: floods and drought Change in Increase in crop Decrease in crop Economic Value of Deforestation damage (in kg) yield (in US$) Agriculture (in US$) Increased erosion Reduction of Increase in crop Increase in crop forest cover production (in kg) yield (in US$) Impact on ecological Physical impact of Socio-economic effects Overall impact of Socio- function and service change in fucntions of physical interest economic effects Figure 1. Overall approach applied to the agricultural sector ASEAN BIODIVERSITY 17 18. SPECIAL REPORTS how the economic value derived from the Leuser Ecosystem by the Net Annual Gains agricultural sector is calculated. 1,000 First, ecological consequences are 900 estimated in terms of, for example, Conservation 800 changes in water retention, erosion, 700 and pest control. Next, these (in million US$) changes in the ecological services 600 are translated into the physical 500 impact for the agricultural sector. 400 Deforestation For example, the reduction of 300 humus availability due to erosion 200 may cause a decline in the overall 100 agricultural output. Also, the re- duced natural pest-control by birds 0 and animals may cause an in- 2000 2010 2020 2030 creased need for fertiliser and Figure 2. Net gains over time of Leuser National Park for the two scenarios. pesticides. Subsequently, these changes in the physical perfor- Figure 2, which highlights the TEV The accumulated TEV at a zero dis- mance of the agricultural sector in the two scenarios over time. In count rate of a deforested Leuser may cause a decline in the crop the deforestation scenario, ample (US$16.9 billion) and of a con- yield as well as an increase in the revenues are generated in the first served Leuser (US$ 22.3 billion) costs of production. This in turn can seven years. After the year 2006, differs in US$5.4 billion. This be translated into a change in the revenues decline. The conservation amount can be considered as the economic value of the Leuser Eco- scenario shows a steady increase benefit of conservation (or the costs system for the agricultural sector. in annual benefits throughout the of deforestation). Economic valuation has been 30-year period. By the year 2030, applied to evaluate the TEV of the the annual benefits in the conser- What is the value of the Leuser Ecosystem under two pos- vation scenario outweigh those of Leuser Ecosystem composed of? sible future scenarios: (1) the ‘con- the deforestation scenario by a The TEV is composed of numer- servation’ scenario, implying that factor of 2. ous categories. These categories protection of the rainforest is strictly By aggregating the annual are shown in the first two columns enforced and thus logging will be gains over the 30-year period, the of Table 1 for the two scenarios. excluded as an economic activity; overall TEV has been determined. The main contributors to the TEV and (2) the ‘deforestation’ sce- nario, implying a continuation of Table 1. Distribution of TEV among goods and services provided by the Leuser Ecosystem the current trend of clear cutting. over the period 2000-2030. The current level and the change Economic Economic Net Benefits of of a large number of benefits have Value of Value of deforestation conservation conservation been determined. These benefits (in million US$) (in million US$) (in million US$) (proportion) include: water supply; fisheries; Water supply 1,601 3,730 2,129 25% flood and drought prevention; Fishery 1,351 1,404 53 1% agriculture and plantations; hydro- Flood prevention 3,269 5,174 1,905 22% electricity; tourism; biodiversity; Hydro-electricity 1,000 1,643 644 8% carbon sequestration; fire preven- Tourism 350 1,645 1,294 15% tion; non-timber forest products; Biodiversity 150 1,484 1,334 16% and timber. Sequestration 0 682 682 8% Fire prevention 400 762 362 4% What is the TEV Non-timber forest products 100 241 141 2% of the Leuser Ecosystem? Net-benefits of conservation 8,544 100% Deforestation may be consid- Agriculture 7,003 5,535 -1,468 47% ered an easy way to generate Timber 1,651 0 -1,651 53% fast cash. In the long term, how- Net-costs of conservation -3,119 100% ever, the negative consequences will dominate. This is shown in Total Economic Value 16,875 22,299 5,424 18 APRIL-JUNE 2002
19. SPECIAL REPORTS distribution of the economic value Net Benefit of Conservation among the stakeholders is pre- 2,500 sented in Table 2. Contrary to 2,000 popular belief, the local commu- nity is at present by far the main 1,500 beneficiary of the Leuser Ecosys- 1,000 tem. In the conservation scenario, (in million US$) 500 they receive 57% of the benefits. 0 These benefits mainly result from the support of water supply, pre- 500 vention of floods, tourism, fisher- 1,000 ies and agriculture. Similarly, the 1,500 local government is a major ben- eficiary of the Leuser Ecosystem. 2,000 Compared to the distribution in Flood Prevention Water Supply Tourism Sequestration Hydro-electricity Fire prevention NTF products Fishery Agriculture Timber Biodiversity the deforestation scenario, only the plantation and logging indus- try sees its economic value derived from the Leuser Ecosystem declin- Figure 3. Net Benefits over time of Leuser National Park for the two scenarios distributed ing as a result of conservation. This over the various categories. is shown in the last column of Table 2. are water supply, flood prevention, value of the Leuser Ecosystem, it is The net benefits shown in the tourism and agriculture. Not sur- important to be aware of the dis- last column of Table 2 are the sum prisingly, timber revenues play an tribution of the TEV of deforesta- of benefits and costs (see Table important role in the deforestation tion and conservation among the 3). For example, by conserving the scenario. different stakeholders. Five groups Leuser Ecosystem, the local popu- Figure 3 looks at the net ben- of stakeholders have been identi- lation will gain benefits in the form efits in more detail. Except for tim- fied in this study: (1) local commu- of prevented flood damage and ber and agriculture, the value of nities; (2) local government; (3) sufficient water supply but at the all benefits is higher in a scenario elite logging and plantation indus- same time they will experience the of conservation. Therefore, these try; (4) national government; and (opportunity) costs of not being categories are presented as ben- (5) international community. The able to collect the timber or clear efits of conservation while timber and agriculture are presented as Table 2. Distribution of the TEV among stakeholders over the period 2000-2030 the (opportunity) costs of conser- (in million US$) vation. The third column of Table TEV Conservation TEV Deforestation Net Benefits 1 also shows this difference be- Local community 12,750 57% 8,923 53% 3,827 tween the TEV of conservation and Local government 4,168 19% 3,065 18% 1,104 deforestation. The total aggre- Elite industry 2,086 9% 3,093 18% -1,007 gated benefits amount to US$8.5 National government 1,192 5% 910 5% 282 billion and the costs of conserva- tion, US$ 3.1 billion. The main International community 2,102 9% 884 5% 1,218 categories that gain from conser- Total 22,298 16,875 5,425 vation are water supply, flood prevention, tourism and Table 3. Distribution of the costs and benefits among stakeholders over the period 2000-2030 (in million US$) biodiversity. At the cost side of con- Benefits of Conservation Costs of Conservation Net Benefits servation, timber and agriculture are approximately of the same size. Local community 4,882 57% 143 5% 3,827 On balance, the local economy Local government 1,571 18% 174 6% 1,104 gains US$5.4 billion from conser- Elite industry 0 0% 2,602 83% -1,007 vation over a 30-year period. National government 592 7% 200 6% 282 International community 1,498 18% 0 0% 1,218 Who wins and who loses? Total 8,544 3,119 5,425 Besides the overall economic ASEAN BIODIVERSITY 19
20. SPECIAL REPORTS the land for additional agriculture. bridges, houses). Therefore, the US$8.5 billion while defor- For the local communities, how- TEV derived from the Leuser Eco- estation generates US$ 3.1 ever, conservation results in a system is also likely to vary among billion of revenues in the positive net benefit of US$3.8 the regencies. coming 30 years; billion. Therefore, local communi- Figure 4 presents the distribu- • Conservation spreads the ties gain 57% of the benefits of tion of the overall TEV of the Leuser benefits of Leuser equally conservation. If logging takes place Ecosystem across the 11 regencies. among the Kabupaten and in the forest, the plantation and Among others, the shares depend thus prevents further conflict, logging industry receives 83% of on the size of the economy and the while deforestation widens the gains. In conclusion, defores- dependency on the Leuser Ecosys- the income gap between the tation harms the majority of the tem. All the regencies are shown to Kabupaten and may be an population (i.e. local communities) benefit from the conservation of additional source of discord. at the cost of the welfare of the rich the Leuser Ecosystem. Aceh Singkil This dependency may form minority (i.e. plantation and log- and Aceh Timur take the smallest a strong incentive for the re- ging industry). The opposite is true part of the pie, mainly due to the gencies to develop and en- for conservation. small size of their economies. In force a common plan; contrast, Langkat and Deli • Conservation promotes so- How is the value of the Leuser Sardang generate high TEV from cial and economic equity be- Ecosystem geographically the Leuser Ecosystem. The regen- cause it mainly supports the distributed? cies in North Sumatra are least poor majority of society while Each regency that forms part of affected by the negative impacts deforestation widens the gap the Leuser Ecosystem has very dif- of deforestation. between the rich and the poor. ferent characteristics. Geographi- The above results should be cally, they vary in the structure of What are the main lessons of considered as tentative outcomes the land (e.g. mountainous, low- economic valuation of the of the economic valuation in the land), the type of land use (pri- Leuser Ecosystem? context of the management of the mary forest, secondary forest), and Economic valuation has proved Leuser Ecosystem. The work in the precipitation (amount and intensity to be a strong and useful tool in field of economic valuation of the of rain fall). Economically and so- analysing welfare changes for the Leuser Ecosystem goes on. Meth- cially, differences may be in terms different scenarios in the Leuser ods will be improved and converted of population characteristics (size, Ecosystem. Several lessons can be to more user-friendly software to density, income), economic struc- learned from the analysis: encourage application of eco- ture (industry, agriculture, public • Conservation prevents dam- nomic valuation by local experts. sector), and infrastructure (roads, age and loss of income of As data collection continues, the uncertainties surrounding the analy- sis decline. Also the spatial appli- Total Economic Value cation of economic valuation by 3,500 linking with methods of Geo- graphic Information Systems (GIS) 3,000 will be investigated. Finally, 2,500 additional scenarios will be simu- Conservation lated. For example, by focusing on (in million US$) Deforestation 2,000 the cost-benefit conditions of ‘projects’ rather than the cost-ben- 1,500 efit situation of the Leuser Ecosys- 1,000 tem ‘as a whole’, the concept of economic valuation can be used 500 more effectively as a communica- tive tool.# 0 Aceh Tenggara Aceh Singkil Diari Deli Serdang Aceh Utara Aceh Tengah Aceh Barat Aceh Selatan Aceh Timur Langkat Karo Pieter van Beukering is connected with the Institute for Environmental Studies (IVM), Vrije Universiteit, Boelelaan 1115, 1018 VR Amsterdam, Figure 4. Distribution of the TEV of Leuser Ecosystem among the regencies over the period the Netherlands; email 2000-2030. beukering@ivm.vu.nl 20 APRIL-JUNE 2002