The Convention on Biological Diversity calls for the integration of biological diversity concerns into decisions taken in social and economic sectors such as energy, transport, regional development, defence, fishing, forestry, and tourism. This new vision for protected areas and sustainable use requires an awareness and identification of the goods and services provided by natural areas, often at no or low costs to the beneficiaries. For communities and public policy decision makers, economic valuation techniques offer insight into the value of a given ecosystem and the services it provides—be it provision of resources such as water or food for direct consumption, services such as waste water treatment and climate regulation, or cultural values, non-commercial and recreational uses.
The process of valuation provides information about the value of nature’s products. It identifies the value various stakeholders place on goods and services, the beneficiaries currently being served, and those groups which would derive additional benefits through alternative uses of protected areas. In this way valuation serves to raise awareness for the concerns of natural resource protection and may provide useful information for management decisions regarding natural resources. In addition, valuation can help to identify alternative methods to finance conservation by revealing costs and benefits that exist but may not be recognised by potential stakeholders.
In current policymaking and academic discussions, the methodologies used to estimate the value of natural and biological resources and the accuracy of such estimates are much debated. Due to the inherent difficulties of quantifying the value of natural goods and services, different approaches yield a wide range of conclusions. Interpreting the findings of various studies consistently and applying the results to form successful policy will remain a challenge for decision makers.
A strong case for considering valuation as a tool to encourage the sustainable use measures is presented in "The Value of the World’s Ecosystem Services and Natural Capital" a paper prepared by an international team of ecologists and economists:
"Because ecosystem services are not fully ‘captured’ in commercial markets or adequately quantified in terms comparable with economic services and manufactured capital, they are often given too little weight in policy decisions. This neglect may ultimately compromise the sustainability of humans in the biosphere."
In countries which are in economic transition, and therefore restructuring the allocation, use, and prices of natural resources within their economies, valuation may also serve to identify those segments of a community or region which bear the costs of resource protection and those which receive the benefits of exploiting such resources. The identification of relevant stakeholders is a necessary step in developing appropriate conservation and development policies surrounding a given biodiversity concern.
The first case study below, "Costing an International Good: The Case of the Baltic Sea," estimates the value of the environmental good to individuals, in this case nations, based on their willingness to pay (WTP) for given environmental improvements. The study yields interesting results and recommendations for further international co-operation. The second study on the value of Croatian forests to tourism uses an approach derived from contingent valuation, i.e. estimating WTP for services directly related to environmental quality, such as lodging and hunting within forest areas. Finally, HIID and USAID in co-operation with local representatives have initiated market oriented monetary valuation in preparation of natural resource tax reform in the Jaroslav Oblast in Russia.
"The Value of the World’s Ecosystem Services and Natural Capital" in Nature Vol 387. May 15, 1997. Further information available on www.nature.com
Comprehensive review of natural resource valuation methods can be found in: Folmer, Gabel and Opschoor (eds.) (1995), Mitchell and Carson (1989), Cummings, Brookshire and Schulze (1986), and Jakobsson and Dragun (1996). For further information contact the World Resources Institute, www.wri.org
An econometric model of cost-sharing was used to determine a hypothetical allocation of abatement costs across the countries around the sea. The application of the model is based on estimates of national abatement costs as well as national willingness to pay for reduced eutrophication. Estimating willingness to pay (WTP) across a group of countries (some of which are undergoing a transition from centrally planned systems) was the main challenge of this study. The results were derived from a co-ordinated series of contingent valuation surveys in Lithuania, Poland and Sweden, combined with benefit transfer studies to cover the rest of the region.
The analysis is a simplified one, non-Baltic countries intersecting with the drainage basin on small areas only (Norway, The Czech Republic, Slovakia, Ukraine and Belarus) were excluded from the study. Germany and Russia were represented by the small parts of their populations adjacent to the drainage basin. A large margin of uncertainty affects the benefit estimates. All surveys carried out were based on the same valuation scenario, i.e. to reduce the eutrophication of the Baltic Sea to a tolerable level defined in terms of reduced algae bloom episodes, eliminated oxygen deficit conditions, and re-opened beaches. All surveys referred to the same payment vehicle, i.e. an internationally co-ordinated earmarked Baltic tax.
The study indicates that there exists an essential asymmetry in the distribution of costs for and benefits from the reduced eutrophication of the Baltic Sea. The analyses demonstrated that WTP revealed in various countries was correlated with the GDP per capita. In addition, Sweden emerges as the single largest beneficiary of the recovery programme with almost 27% share in total benefits. It is followed by Poland (24%), and Denmark (16%). The Baltic republics are located at the bottom of this list enjoying collectively less than 3% of the total benefits. Thus more than 2/3 of all benefits accrue to Sweden, Denmark and Poland. Another important observation emerging from the analyses is that the total benefits USD 6048 million per year outweigh the costs USD 4140 million per year by a factor of approximately 1.5.
Predictions of efficient cost-sharing schemes obtained from the model were compared with actual data on abatement expenditures and international assistance. The conclusion from this comparison was that actual transfers between the Baltic drainage basin countries are lower by at least one order of magnitude than those derived from the model. Notwithstanding the co-operation of countries in the region and the recognition of other forms of interaction between countries which may substitute for direct transfers for environmental financing, the study suggests: if in the next decade countries are to efficiently allocate their abatement effort they must establish a financial mechanism to carry out transfers on a much larger scale than currently observed.
In the mid-1990s there were proposals at the Helsinki Convention to establish a Baltic wide fund (corresponding to 5% of abatement costs) to stimulate an improved allocation of abatement efforts. According to the model predictions, an efficient level of transfers corresponds to over 20% of the total region-wide costs.
Agnieszka Markowska, Tomasz Zylicz: Costing an International Good: The Case of the Baltic Sea. Warsaw Ecological Economics Center. Warsaw University, May 1996. Published in Ecological Economics, forthcoming.
The assessment conducted in this study was carried out for fourteen sites that are proposed for the restoration. Estimates for the landscape values of restoration are based on the visitors’ willingness to pay for the forested landscape (derived from contingent valuation studies) estimated at $1.50 per visitor per day. Benefits from each site are then determined from the number of hotels beds which would benefit from the restoration. The results are adjusted for site specific factors, e.g. attractiveness of the locality. Hunting values are also measured in terms of additional permits sold to foreign hunters. Where watershed values are relevant, per hectare benefits from avoided damage costs are used. Wood production is based on harvest rates for pulpwood or logs, and assumed stumpage fees of $10/m3 and $ 30m3 respectively.
Based on these figures, the author suggests that landscape considerations are paramount and by themselves justify restoration at all of the sites where restoration has a positive rate of return. The study demonstrates how valuation can be used as a tool for aiding decisions at a project level.
"Economic Values of Protected Areas. A Guide for Protected Area Managers." Draft prepared for the Economic Benefits of Protected Areas Task Force, World Commission on Protected Areas, IUCN The World Conservation Union, April 1998.
The study provides a methodology for valuating resource goods and services as well as developing some indication of potential values. The valuation methodology covered products and services from water resources (e.g. drinking water, surface and sub-surface, agriculture waters), forest resources (e.g. timber, hunting, fuel-wood, non-timber products, including animals and plants) and mineral resources such as gravel and sand. Four types of valuation were carried out in the study:
According to the study, monetary values of forest resources in the surveyed districts are also considerably underestimated. Russian regions feature two pricing systems for timber: one based on official rates for large logging companies and the other based on an illegal market. According to a preliminary expert assessment, up to 20 percent of forests are cut down free of charge. The monetary valuation has shown that direct subsidies to enhance reforestation alone will be of little significance, as reforestation would not address the current problem of illegal cutting. Therefore it is essential to introduce forest management policies that would meet the goals of sustainable development and introduce improved measures to reduce illegal forest cutting.
In addition to the specific recommendations described above, the project has made it clear that valuing natural resources in Russia is necessary for taxation improvements and that such taxation can be practically implemented. Such an exercise could be essential for the creation of a national system of integrated economic and environmental accounting that would be internationally compatible.
"Natural Resource Accounting for the Oblast of Jaroslav in the Russian Federation." Environmental Discussion Paper No:35, NIS EEP Project, HIID, 1997. For additional information contact: International Environmental Program, HIID, One Eliot Street, Cambridge, MA 02138, fax: + 617 496 8040.