Economic Valuation of Ecosystem Services in the Context of Irrigation

Presentation at IWMI-WLE Workshop (04- - 09-2015 )

Parakrama Weligamage Agricultural Economics and Business Management

University of Peradeniya

Presentation Outline

• Ecosystem services concept• Ecosystem services in the context of irrigation

systems• Introduction to the concept of economic values• Economic valuation methods• A case study on contingent valuation?

Why We should do in Valuation?

• Ecosystems provide services: • 1) Identify what are they

(Understanding through science)• 2) Place a value through economics• 3) Use in Policy making or applying market based

mechanisms to enable these values to be reflected in decision-making through incentives and price signals.

Ecosystem Services: An application

• The UK- National Environmental Assessment identified

- (8) Eight Broad Habitats - and give examples of the services derived from

each…… [Figure Here]

Services from Enclosed Farmland

Food Fiber Bio-fuels Fresh water Climate regulation Pollution controlWater quality regulation PollinationDisease and pest control Recreation Aesthetic values Cultural heritageEducation Sense of place

Based on MEA

• Categories all services into …..

– Four Categories as,• Provisioning services• Regulating services• Cultural services, and • Supporting services.

7

ExcludabilityLow -----------------High

RivalroryCommon goods (Common-pool resources)fish stocks, timber, coal

Private goodsfood, clothing, cars, personal electronics

Public goodsfree-to-air television, air, national defense

Club goodscinemas, private parks, satellite television

Categories of Goods/services

Defining Economic Valuation

• All values are anthropocentric• Value of satisfaction generated through the changes

occurred of the economic agent• We use values as a quantitative measure - $

values [ common unit]• > can compare across space, time and context

using appropriate conversion factors• > Can aggregate by categories > make totals

Getting Values from Economic Agents

• Willingness to Pay` - Maximum amount a person would pay (willingness &

ability to pay) for gains. – Sacrifice or trade-off people will make– Market prices are WTP for one more unitWillingness to Accept

• Minimum amount a person would accept to forego a particular ecosystem service in a particular place

Total Economic Value

• What is the value of all services emanating from a resource?

Components of Total Economic Value

– Use Values• Consumptive Use• Non-consumptive Use• Vicarious Use

– Non Use or Passive Use Values• Sometimes option value for future use• Existence Value

– To know it exists for oneself or others of current generation

• Bequest Values to future generations

Economic Valuation Methods

• How we get the numbers?

If goods and services have markets – Then we have market prices

If Not?

Non-Market Valuation methods

Non-market Valuation Techniques that measure WTP

Non-market Valuation Techniques that measure WTP

Behavioral Linkages

Revealed Preference

Averting BehaviorAverting Behavior

Travel Cost MethodTravel Cost Method

Hedonic Property AnalysisHedonic Property Analysis

Hedonic Wage-risk AnalysisHedonic Wage-risk Analysis

Benefit TransferBenefit Transfer

Non-market Valuation Techniques that measure WTP or WTA

Non-market Valuation Techniques that measure WTP or WTA

Behavioral Linkages

Revealed Preference

Averting BehaviorAverting Behavior

Travel Cost MethodTravel Cost Method

Hedonic Property AnalysisHedonic Property Analysis

Hedonic Wage-risk AnalysisHedonic Wage-risk Analysis

Contingent Valuation Method

(Bundle valuation)

Contingent Valuation Method

(Bundle valuation)

Stated Preference

Benefit TransferBenefit Transfer

Conjoint Analysis(attribute valuation)

Conjoint Analysis(attribute valuation)

Choice Experiments(attribute valuation)

Choice Experiments(attribute valuation)

Understanding Services from Tabbowa

• Crop Agriculture• Livable habitats• Fisheries• Livestock• Domestic Water to Puttalam City and residents• Recreation by residents• Water for wildlife• Habitats for wildlife• Other Productive Uses

15

Extending to other systems

• Tourism• Hydropower• Landing for sea planes• Boat rides….. Closer to cities/popular

destinations• Carbon Sequestration

17

Tissawewa Irrigation Tank: Scenic Beauty

Irrigation and Tourism: Giritale

18

Irrigation and Tourism: Kandalama

19

Prospects for Mutual Existence?

20

Two sides of the story

Two sides of the story

• stewards, or providers [ • beneficiaries, or users• Who gets benefits?LocalSub-nationalNationalGlobal

Once values are known…

• make arrangements for a mechanism for transaction in $ terms

• Biodiversity offsetting • Certification schemes• Payment for Ecosystem Services

Appliocation..... Veheragala Diversion Project

YPC

75 MCM storage reservoir Diversion: 60 MCM (50 MCM to augment KOISP)

Wildlife at YPC

Changes in flow volumes at YPC

Impact of Veheragala Project on YPC

• YPC undergoes severe water stress during the dry season

• Regulated downstream release will increase dry season flow to 165% of current volumes)

• Therefore the project can be considered beneficial to YPC

Hypothetical Market

Good status of the environment can only be achieved by releasing water to YPC during dry season

General public of SL will be benefited through Bequest and existence values

Water releases should be financed by the public

Procedure and Results

• Elicitation formatSingle bounded dichotomous choice contingent

valuation aka Referendum

WTP Values = 17.5 Billion LKR

Conclusions

• Irrigation Systems provide multiple benefits• They occur to many beneficiaries• Values to humans of a resource can be

estimated using economic valuation methods• These methods can be applied to serices

generated by irrigation systems

References

• The United Kingdom Department for Environment, Food & Rural Affairs. 2013. Payments for Ecosystem Services: A Best Practices Guide. Available online [ https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/200920/pb13932-pes-bestpractice-20130522.pdf]

• Weligamage, P. 2012. Irrigation in Sri Lanka: Retrospect and prospect. Presidential Address-Section F. SLAAS.

• Parakrama Weligamage, Walter R Butcher, Keith A Blatner, C Richard Shumway, Mark Giordano. 2010. Non-user Benefits Emanating from Enhanced Water Flow to the Yala Protected Area Complex Proceedings of the National Conference on Water, Food Security, and Climate Change in Sri Lanka, BMICH, Colombo, June 9-11, 2009. Volume 2. Water quality, environment, and climate change.

• Thank you for your attention