Economic Valuation of FES and approaches to payments for ...foresteurope.org/wp-content/uploads/2017/08/Germany-1.pdf · Overview 1. Preliminary consideration: What are „economic

Peter Elsasser

Peter ElsasserThünen-Institute for International Forestry and Forest Economics, Hamburg

Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017

Economic Valuation of FES and approachesto payments for FES in Germany

Peter Elsasser

Overview

1. Preliminary consideration: What are „economic values“?

2. What do we know about economic values of FES in Germany?

3. Approaches to Payments for FES: Some examples under German conditions

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Peter Elsasser

Overview




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Peter Elsasser

1. Preliminary consideration:

What are „economic values“?

Theoretical background: Environmental Economics & Welfare Theory

• Two fundamental methodological norms: Individualism/Self-determination

• Individualism: „values“ are determined by individual utility only• Self-determination: preferences are expressed by the individuals

Measurement concept: individual Willingness to Pay (WTP)

Maximal amount (of money, time or other goods) an individual is willing togive up in order to obtain a defined quantity & quality of a good/service

⇒ ultimately rooted in individual utility / individual demand⇒ usually expressed in monetary terms (→ cardinal indicator for ordinal utility)

Practical application

⇒ primarily: policy advice (adjustment of policies, financial support, etc.)⇒ further implication: upper bounds for market prices/PES (→ WTP ≠ „prices“!)

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Peter Elsasser

Overview



a. Data sources

b. Aggregate values of different FES in Germany

c. Ongoing project "ReWaLe"


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Peter Elsasser

2. WTP for FES in Germany: a. data sources

1) Market goods (e.g. timber, game meat)

Regularly updated official price reports & statistics

but: usually report prices; welfare measures (WTP) are rarely deduced

2) Non market goods (most FES)

Many specific studies worldwide (primarily in USA, UK, Scandinavia)

In Germany : several studies exist – but less extensive coverage

• Systematic reseach only since ~1990ies

• Today: about ~100 studies on FES available(mostly local case studies, methodological analyses; varying quality)

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Peter Elsasser

2. WTP for FES in Germany: a. data sources (non market goods)

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Main idea: supplementing other international data bases (like EVRI)

Developed & maintained by Thünen Institute & TU Berlin (regular updates)

Methods covered: CVM, TCM, CE, BT

Data Base on FES valuation in the German speaking area


Data Base (Excel) andexplanatory reportdownloadable underhttps://www.thuenen.de/en/wf/figures-facts/environmental-valuation/data-base-forest-services/

Source: Elsasser, Meyerhoff, Weller 2016

https://www.thuenen.de/en/wf/figures-facts/

Peter Elsasser

2. WTP for FES in Germany: b. aggregate values of different FES

Results from the German TEEB study

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3542

199

267

1928

2200

0 500 1000 1500 2000 2500 3000 3500 4000

Holzproduktion(Produktionswert nach FGR)

Wildbret (Primärwertvon Schalenwild)

Senkenleistung(ZB für Emissionsreduktionen)

Erholungsleistung(Betretensrecht)

Umsetzung d. Biodiversitäts-strategie (hier: in Wäldern)

Million Euro /year

Source: Naturkapital Deutschland – TEEB.DE, p. 152-179


Realisation of BiodiversityStrategy (here: in forests)

Recreation(access rights)

Carbon Sequestration (WTP for emission reduction)

Game Meat(primary value of hoofed game)

Timber Production(production value according to

national forestry accounting)

Peter Elsasser

2. WTP for FES in Germany: b. values of FES: State of knowledge

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Most available non market studies focus on

• Cultural services of biodiversity & nature protection

• Recreation/tourism (everyday and holiday)

• Little knowledge about spatial distribution & trade-offs

Further ecosystem services of forests(potable water supply; local protection against flooding, landslides, climatic extremes; tourism; landscape aesthetics; recreationalhunting)

• Information even more fragmentary

• Mostly local case studies


Peter Elsasser

2. WTP for FES in Germanyc. ongoing project "ReWaLe" (2016-18)

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ReWaLe = "Regionalisation of values of FES in Germany"

Goals

Analysis of economic values of FES, regarding• spatial variability• trade-offs between services

Further development into a spatial model• Effects of changes in forest area, composition, management• Scenario analyses for spatial optimisation potentials

Approach

Regression analyses of existing valuation studieswith respect to regional explanatory variables

Additional primary surveys, where necessary Spatial distribution via „benefit function transfer“


Peter Elsasser

Overview




a. Subsidisation

b. legal/institutional adjustment

c. Private initiatives

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Peter Elsasser

3. Approaches to Payments for FESa. Subsidisation (PES in a broader sense)

Competences at three governmental levels

• Generally: Länder programmes• Joint programme "GAK" (federal government & Länder)• EU (co-financing)

Problems

• Historically oriented at timber production profitabilityrather than (public) FES

• Complicated regulations⇒ low demand by forest enterprises⇒ declining acceptance & implementation by Länder governments

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Peter Elsasser

3. Approaches to Payments for FESb. Legal / institutional adjustment

Example: "Eco-Accounts"

Possible due to legal reform of compensation rulesin Nature Protection and Building codes

→ allow for trading & banking[Fed. Nature Protection Act §§ 16 ff.; Building Act §200a]

Basic mechanism

Land owner invests in voluntary nature protectionmeasures

In return, nature protection agency issues eco-creditvouchers

Land owner sells eco-vouchers to third party which isobligated to compensation measures(e.g. due to land development)

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Sources: Naturkapital Deutschland –TEEB.DE, S. 72-98; Ulrike Pröbstl


Peter Elsasser

3. Approaches to Payments for FESc. private initiatives

Example: "upgrading"

→ Generating additional benefits by „upgrading“ private goods

Basic mechanism

sale of private goods, which are valorised by bundling themwith a public good

Examples:

Nature Tourism

Mobile telephone apps(e.g. video guides for forest excursions)

etc …

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Peter Elsasser


Example: sponsoring

basic mechanism

company donates for a „good cause“

receives exclusive advertising rights

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Example: Krombacher Beer Brewery

reafforestation after wind throw (city of Brilon)

(further projects for wetlands, rain forest protection)


Peter Elsasser


Example: „corporate responsability“ services

Basic mechanism

Co-financing of FES-related forest management by third partieswishing to compensate for their ES consumption

Example: voluntary emission reduction certificates

World wide market size: 28 m t CO2 / 216 m US$ (2012)

German example: „forest share“ (afforestation for compensating emissionsdue to holiday travels)

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Sources: Naturkapital Deutschland – TEEB.DE, S. 72-98; Peters-Stanley et al. 2013


Peter Elsasser

3. Approaches to Payments for FES„corporate responsability“ services

Example: „corporate responsability“ services cont.

Example: „Drinking Water Forest“

Compensation of large-scale consumers‘ water uptakeby forest conversion measures

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Sources: bionade.de; rittweger-team.de


„We plant drinking water“

Peter Elsasser

Conclusion: WTP and income potentials

Substantial WTP exists for unpriced forest services in Germany under current conditions as well as for potential improvements

WTP inform about the utility of forests & FES for society Marketing potentials for forest enterprises (upper price bounds)

Preconditions for FES marketability Securing & enforcement of property rights Commitment & dedication

PES examples show: Niche markets exist even for „public“ goods of forests Marketing may be beneficial for society and forest owners

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Peter Elsasser17.9.2016 Tagung „Wem gehört der Wald?“ der August-Bier-StiftungSeite 19

Thank you for your attention!

Peter Elsasser

Relation betweenWTP – demand curves - prices

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Consumersurplus

turnover

Market price

quantity

Relation between WTP and prices for private goods


Peter Elsasser

Relation betweenWTP – demand curves - prices

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Consumer surplus

pricequantity

WTP for non-market goods (public goods)


Documents

Economic Valuation of FES and approaches to payments for ...foresteurope.org/wp-content/uploads/2017/08/Germany-1.pdf · Overview 1. Preliminary consideration: What are „economic