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The Economist‘s Toolbox

Week 4 March, 26 2014 . The Economist‘s Toolbox. Hannes Etter, ELD Secretariat. Today‘s presentation:. The Total Economic Value (TEV) framework Non demand based methods: The case of bush encroachment in Namibia Market price & Replacement cost method

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The Economist‘s Toolbox

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  1. Week 4 March, 26 2014 The Economist‘s Toolbox Hannes Etter, ELD Secretariat

  2. Today‘s presentation: • The Total Economic Value (TEV) framework • Non demand based methods: The case of bush encroachment in Namibia • Market price & Replacement cost method • Demand-based methods: Flamingo's value in Kenya • Travel cost method • Benefit transfer: The value of the Catalan coast, Spain • Conclusion

  3. Non-demand based methods: Market price & Replacement cost • Market price method: • estimates the economic value of ecosystem services bought and sold in markets  people's actual willingness to pay • Advantages: relatively easy to apply, well-defined, and accepted • Shortcomings: missing or distorted markets, insufficient records • Replacement-costs: • Costs related to (technical) replacement of lost ecosystem services • Advantages:relatively easy to apply, capture the use-value • Shortfalls: artificial replacement may not be able to fully compensate for the loss of the original ecosystem services, full replacement cost data may not be available

  4. Non-demand based methods: The Namibian Example • Problem-statement: • Increased encroachment of acacia mellifera • Reduction of key ecosystem services of the natural savanna ecosystem • Objective: • Create a public subsidy scheme which co-funds bush removal to support farmers in increasing land productivity • Approach: • Calculate the economic benefits from restoring ecosystem services to identify the justified subsidy level

  5. Non-demand basedmethods : The Namibian Example • Included ecosystem services: • Livestock production: Market price Increased carrying capacity through bush cutting, measured by meat-price • Water provision: Replacement costsHigher groundwater abstraction yields after increased infiltration capacity, measured in reduced infrastructure costs • Energy production: Market priceUtilization of cut wood to produce electricity, measured in electricity prices • Result: Restored ecosystem services value can contribute 42% of the required clearing costs per ha

  6. Demand based methods: Travel-costs method • Recreational service of an ecosystem is reflected in the accepted travel costs of visitors • Travelling time and transportation costs represent a site’s access costs • Revealed preference method based on use-value • Zonal travel costs approach: Based on geographical units (concentric circles or divisions) • Individual travel costs approach: Based on individual characteristics • Advantages: relatively easy to apply, possibility of large size samples, • Shortfalls: limited to cultural ecosystem services, methodological limitations (multi-purpose trips, substitutes)

  7. Demand based methods: Flamingo's value in Kenya • Objective:Estimate the recreational value of preserving the current flamingo population in the Lake Nakuru National Park (LNNP), Kenya • Approach: Zonal travel costs for non-residents; Individual travel costs for residents, travel costs are used as proxy for recreational activity value

  8. Demand based methods: Flamingo's value in Kenya • Non residents: Zonal travel costs • Value based on the flight costs from each zone • Residents: Individual travel costs • Value based on travel costs of round trip, income, age, education, travel costs to substitute site, appeal of flamingo viewing, and site environmental quality • Results: Economic potential of Lake Nakuru National Park was far greater than realized earnings for non-residents, residents were more sensitive to increased fees Increase of entrance fees for non-residents by 310% to raise funds and preserve environmental quality

  9. Benefit transfer • “Benefit transfer uses economic information[…] to make inferences about the economic value of ecosystem services at another place and time” (Wilson & Hoehn, 2006) • Four step approach: • 1. Identify existing case studies • 2. Assess transferability (ecosystem services, stakeholders, institutions) • 3. Screen and select case studies based on their quality • 4. Adjust to local circumstances • Advantages: Easy to conceptualize, first screening option • Shortfalls: Relies on quality of other studies, adjustment increases error-risk, actuality of primary data

  10. Benefit transfer: The value of the Catalan coast, Spain • Objective: Provide a rationale to strengthen the coastal management strategy through monetary arguments • Approach: Spatial value transfer based on land/marine cover per comarca(= adm. units with coherent natural & socio-economic characteristics)

  11. Benefit transfer: The value of the Catalan coast, Spain • Development of GIS land/marine cover map • Matching of land/marine cover with the identified set of ecosystem services based on literature matching the local circumstances • Calculate inflation / exchange rates • Results:ecosystem services constitute 2.8% of the study areas' GDP: ~3.2 mil USD/yr on 931,460 ha • Sustainable management is required to maintain this value flow

  12. Benefit transfer: The value of the Catalan coast, Spain • Development of GIS land/marine cover map • Matching of land/marine cover with the identified set of ecosystem services based on literature matching the local circumstances • Calculate inflation / exchange rates • Results:ecosystem services constitute 2.8% of the study areas' GDP: ~3.2 mil USD/yr on 931,460 ha • Sustainable management is required to maintain this value flow

  13. Conclusion • Valuation of ecosystem services must be based on a case by case basis! • A wide range of methods is available to researchers, each geared to certain services and approaches • Questions to be addressed before selecting a method: • What is the objective of my research? • Which ecosystem services do I want/need to value? • How much resources (money/time) are available to me? • What kind of data is available and what further data is required? • “It is wiser to find out than to suppose”(Mark Twain)

  14. Case Studies • Namibia: • ETTER, H. (2012): The economics of bush encroachment. Applying the TEEB-approach to Namibia’s savanna. Ministry of Environment and Tourism. Windhoek, Namibia • Kenya: • NAVRUD, S. & MUNGATANA, E.D. (1994): Environmental valuation in developing countries: The recreational value of wildlife viewing. Ecological Economics. 11:135-151 • Spain: • BRENNER, J et al. (2010): An assessment of the non-market value of the ecosystem servicesprovidedby the Catalan coastal zone, Spain. Ocean & Coastal Management. 53:27-38

  15. Benefit transfer: The value of the Catalan coast, Spain

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